GCC Sugar-Based Excise Tax Reform: Implications and Opportunities for Indian Businesses

The Financial and Economic Cooperation Committee at the Gulf Cooperation Council (GCC) in October 2025 approved changes to how excise tax is applied to sweetened beverages. In line with these changes, the Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) has updated the Implementing Regulations of the Excise Tax Law, which are in effect from January 6, 2026.

The amendments introduced a tiered volume-based excise tax model for sweetened beverages. Carbonated drinks now fall under the category of sweetened beverages, where previously they were treated as two separate categories. Under the new model, excise tax will be levied as a fixed amount per litre, determined by the applicable tier based on sugar content per 100 ml of the ready-to-drink beverage (i.e., sugar concentration), replacing the earlier flat excise tax rate of 50 percent on retail selling price.

According to ZATCA, the new methodology replaces the existing excise tax on sweetened beverages, which is currently imposed at a fixed rate of 50 percent of the retail price. The authority defines sweetened beverages as any products intended for consumption as drinks to which sugar or other sweetening substances have been added. This definition covers beverages in all forms, including ready-to-drink products, concentrates, powders, gels, extracts, and any other forms that can be reconstituted into a beverage.

The authority stated that the revised methodology for calculating excise tax on sweetened beverages, based on total sugar content, is intended to support public health objectives and encourage reduced sugar consumption. By linking taxation to sugar levels, the policy incentivizes producers and importers to offer beverages with lower sugar content, aligning with international best practices.

What does it mean for the Indian Businesses?

This step is likely to increase the retail prices of sweetened beverages and will affect the demand for high-sugar Indian beverage exports. The new regulatory standard, in due time, will also push Indian manufacturers to reformulate export-oriented products by lowering sugar content or exploring alternative sweeteners. While this may initially increase the production and compliance costs in the short term, it will encourage innovation and alignment with global health-driven market trends.

Simultaneously, the policy presents Indian exporters with opportunities for low-sugar beverages, functional drinks, and alternative sweeteners, as GCC markets may increasingly prefer products that fall within lower tax categories. Indian ingredient suppliers may also benefit from the rising demand for sugar substitutes and reformulation inputs.

Exporters must also comply with stricter regulatory and labelling requirements, including accurate measurement and declaration of sugar content. Overall, the policy aims to promote public health and may initially challenge traditional high-sugar beverage exports but could strengthen long-term prospects for healthier, value-added Indian beverage exports.